Baby Boomers : Few Cash In on Image of Affluence

As a computer analyst earning more than $32,000 a year, 31-year-old Bill Mitchell could be your typical affluent baby boom professional. But, rather than enjoying the glow of his career success, Mitchell is increasingly frustrated.

After paying rent on his Hermosa Beach apartment and other expenses, he, his wife and two young children have little money left over to enjoy the good life, he said. They can afford to eat out only about once a week. And he has little left over to save or invest in stocks, bonds or what he really wants--a house.

"I'm making more money than my dad did ever in his life, but I can't afford a home and he could," Mitchell said, noting that his car payments of $260 a month were more than his father's house payments at $150 a month. "It's frustrating. I've got a good and stable job with potential for upward mobility, but yet with just one income, to get a real nice home would be a hard situation."

Stereotype Unrealistic

Many of the 76 million Americans born during the so-called baby boom during the two decades following World War II would find Mitchell's case painfully familiar. The popular stereotype of baby boomers as free-spending, self-indulgent, affluent young urban professionals (yuppies) driving BMWs, buying video cassette recorders and taking Club Med vacations is far from reality for the bulk of the generation, according to economists, policy-makers and other experts.

Instead, baby boomers are being squeezed by multiple economic forces: a labor market crowded by their massive numbers, the national shift of employment from manufacturing to service industries, slower economic growth, higher inflation, higher real interest rates, higher taxes and other factors.

Baby boomers are finding it harder to afford homes and, despite their image as free spenders, have been actually spending less on luxuries than their predecessors did a decade ago.

Adjust to Predicaments

Many economic, social and demographic changes of the last decade--smaller homes, more women in the work force, later and fewer children per family, adult children leaving their parents' homes later, a lower savings rate and higher consumer debt--are attributed at least partly to baby boomers adjusting to their financial predicaments, many experts contend.

"While the middle class as a group is not disappearing, the young middle class (principally the baby boomers) has experienced a dramatic decline in its ability to pursue the conventional American dream: a home, financial security and education for their children," said a December report prepared by the Urban Institute, a Washing ton-based think-tank, for the congressional Joint Economic Committee.

"The whole idea of the baby boom as a group of super-affluent yuppies is a gross distortion," said Sandra Shaber, a consumer economist at Chase Econometrics, a leading economic research firm.

In fact, a typical young family headed by a person between 25 and 34 hardly fits the yuppie stereotype, the Urban Institute report said. It consists of a husband and wife and one child under age 12 earning a median pre-tax family income of $25,157, "hardly enough to buy a BMW and eat out regularly," the report said.

Despite a higher incidence of two-income families and higher educational levels, average income for such families fell 14% between 1973 and 1983, according to the Census Bureau. That makes baby boomers financially worse off than their counterparts at the same age 10 to 20 years ago, economists say.

Such a trend has far-reaching psychological, social, economic and political implications.

The inability of many baby boomers to quickly match their parents' status--suburban homes, providing for two or more children--is leading to a growing disillusionment in the generation and even might be a factor behind the growing divorce and suicide rate, some experts argue.

Baby boomers' lower savings rate, if continued, could depress future investment in business and technology. Their high rate of borrowing through credit cards and other debt instruments--seen as a major force behind the recent ballooning of consumer debt--sparks fears that they may be overextending themselves and may have to cut back spending, which could throw the economy into recession, some economists fear.

'Generational Equity'

The plight of baby boomers and their children also is increasingly injecting issues of "generational equity" into debates over policies governing taxes, the federal deficit, Social Security and other issues--particularly since baby boomers account for nearly half of all adults of voting age.

One example of the growing interest in generational equity is the formation last year of a special-interest organization, Americans for Generational Equity, co-chaired by Sen. Dave Durenberger (R-Minn.) and Rep. James R. Jones (D-Okla.) to promote reform of Social Security and Medicare and other policies.